KENAI OIL GAS LEASE

University of Alaska
OIL AND GAS LEASE
[Goose Bay Parcel - MS.GB.XXXX]
THIS OIL AND GAS LEASE (“Lease”) is entered into this day of , 2011,
between the UNIVERSITY OF ALASKA, a corporation created under the Constitution and
laws of the State of Alaska, whose address is University of Alaska Land Management, 1815
Bragaw Street, Suite 101, Anchorage, Alaska 99508-3438 (“University”), and
____________________ whose address is _________________, Anchorage, Alaska 995__
(“Lessee”).
In consideration of the payment made by Lessee to the University, which payment includes the
first year’s annual rent payment in the amount of _________________ DOLLARS ($______)
and a cash bonus in an amount of _________________ DOLLARS ($______) for a total
payment in the amount of _________________ DOLLARS ($______) and subject to the
provisions of this Lease, the University and Lessee agree as follows:
1. GRANT.
A. Subject to the provisions in this Lease, the University grants and leases to Lessee,
without warranty, and Lessee takes and leases from the University, the exclusive right to
drill for, extract, remove, clean and process (but not refine), Oil, Gas, and Associated
Substances on or under the following described real property located within the Palmer
Recording District, Third Judicial District, State of Alaska:
TOWNSHIP 15 NORTH, RANGE 3 WEST, SEWARD MERIDIAN,
ALASKA
SECTION 5: E2NE4, excluding that portion conveyed by State of Alaska
Quitclaim Deed No. 500, recorded in the Palmer Recording
District on April 28, 1982 in Book 261, Page 214; and
NW4, excluding that portion conveyed by State of Alaska
Quitclaim Deed No. 500, recorded in the Palmer Recording
District on April 28, 1982 in Book 261, Page 214.
SECTION 6: E2SW4, E2SE4, and Lots 3 and 4; and
NE4, excluding that portion conveyed by State of Alaska
Quitclaim Deed No. 500, recorded in the Palmer Recording
District on April 28, 1982 in Book 261, Page 214.
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SECTION 7: NE4, E2W2, S2SE4, and Lots 1, 2, 3 and 4.
According to the GLO Survey Plat of Township No. 15 North, Range No. 3
West of the Seward Meridian, Alaska, approved by the U.S. Surveyor
General’s Office in Juneau, Alaska on April 10, 1918.
TOWNSHIP 16 NORTH, RANGE 3 WEST, SEWARD MERIDIAN,
ALASKA
SECTION 32: S2, excluding that portion conveyed by State of Alaska
Quitclaim Deed No. 500, recorded in the Palmer Recording
District on April 28, 1982 in Book 261, Page 214.
According to the GLO Survey Plat of Township No. 16 North, Range No. 3
West of the Seward Meridian, Alaska, approved by the U.S. Surveyor
General’s Office in Juneau, Alaska on October 24, 1914,
containing approximately ONE THOUSAND FOUR HUNDRED SIXTY FOUR AND
188/1000 (1464.188) ACRES, (“Leased Area”) as generally depicted on the map attached hereto
as Exhibit A; the non-exclusive right to conduct from locations outside the Leased Area,
geological and geophysical exploration of the Leased Area for Oil, Gas, and Associated
Substances. NOTWITHSTANDING ANY OTHER PROVISION CONTAINED HEREIN
TO THE CONTRARY: (i) THIS LEASE GRANTS NO RIGHTS OF ANY KIND TO
ENTER UPON USE OR OPERATE ON THE SURFACE OF THE LEASED AREA.
RIGHTS TO OPERATE ON THE SURFACE OF THE LEASED AREA, IF ANY, SHALL
ONLY BE PURSUANT TO A WRITTEN PERMIT GRANTED BY THE UNIVERSITY
IN ITS SOLE DISCRETION; AND (ii) THIS LEASE GRANTS NO RIGHTS OF ANY
KIND IN OR TO COALBED METHANE OR OTHER GASEOUS SUBSTANCES
PRODUCED OR PRODUCIBLE BY IN SITU EXTRACTION METHODS FROM COAL
SEAMS. (See Paragraph 31.B herein). The rights granted by this Lease are to be exercised in
a manner which will not unreasonably interfere with the rights of the University or any
permittee, lessee or grantee of the University. Furthermore, the rights granted may not
unreasonably interfere with the eventual development of other mineral deposits on the Leased
Area.
B. If, after the effective date of this Lease, the Leased Area is surveyed and
determined to be greater or less than the acreage stated herein, the rentals or royalties
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provided to be paid to University under this Lease at a time subsequent to the survey shall
reflect any and all such adjustments.
C. If the University’s ownership interest in the Oil, Gas, and Associated Substances
in the Leased Area is less than an entire and undivided interest, the grant under this Lease
is effective only as to the University’s interest in that Oil, Gas, and Associated
Substances, and the royalties and rentals provided in this Lease must be paid to the
University in the proportion that the University’s interest bears to the entire undivided
fee.
The University makes no representations or warranties, express or implied, as to title, or access
to, or quiet enjoyment of, the Leased Area. The University is not liable to Lessee for any
deficiency in title to the Leased Area, nor is Lessee or any successor in interest to Lessee entitled
to any refund due to deficiency in title for any rentals, bonuses, or royalties paid under this
Lease.
2. RESERVED RIGHTS.
A. The University, for itself and others, reserves all rights not expressly granted to
Lessee by this Lease. These reserved rights include, but are not limited to:
(i) the right to explore for Oil, Gas, and Associated Substances by geological
and geophysical means;
(ii) the right to explore for, develop, and remove natural resources, other than
Oil, Gas, and Associated Substances, on or from the Leased Area;
(iii) the right to establish or grant easements and rights-of-way for any lawful
purpose, including without limitation for shafts and tunnels necessary or
appropriate for the working of the Leased Area or other lands for natural
resources other than Oil, Gas, and Associated Substances;
(iv) the right to dispose of land within the Leased Area to Lessee or any other
party, for well sites and well bores of wells drilled from or through the Leased
Area to explore for or produce Oil, Gas, and Associated Substances in and from
lands not within the Leased Area;
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(v) the right to otherwise manage and dispose of the subsurface of the Leased
Area or interests in that land by grant, lease, permit or otherwise to third parties;
(vi) ALL RIGHTS TO THE SURFACE ESTATE OF THE LEASED
AREA, including without limitation all rights to use, occupy and develop the
surface of the Leased Area and to manage and dispose of the surface of the
Leased Area or interests in that land by grant, lease, permit or otherwise to third
parties; and
(vii) ALL COALBED METHANE or other gaseous substances produced or
producible by in situ extraction methods from coal seams. (See Subparagraph
31.B herein.)
(viii) The rights reserved may be exercised by the University, or by any other
person or entity acting under authority of the University, in any manner that does
not unreasonably interfere with or endanger Lessee’s operations under this Lease.
3. TERM. This Lease is issued for a primary term of FIVE (5) YEARS from the effective
date of this Lease. The primary term may be extended as provided in Paragraph 4 below.
4. TERM EXTENSION.
A. This Lease will be extended automatically if and for so long as Oil or Gas is
produced in Paying Quantities from the Leased Area.
B. (i) If the Drilling of a well whose bottom hole location is in the Leased Area has
commenced as of the date on which the Lease otherwise would expire and is
continued with reasonable diligence, this Lease will continue in effect until
NINETY (90) DAYS after cessation of that Drilling and for so long as Oil or Gas
is produced in Paying Quantities from the Leased Area.
(ii) If Oil or Gas in Paying Quantities is produced from the Leased Area, and
if that production ceases at any time, this Lease will not terminate if Drilling or
Reworking Operations are commenced on the Leased Area within SIX (6)
MONTHS after cessation of production and are prosecuted with reasonable
diligence; if those Drilling or Reworking Operations result in the production of
Oil or Gas, this Lease will remain in effect for so long as Oil or Gas is produced
in Paying Quantities from the Leased Area.
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C. If there is a well capable of producing Oil or Gas in Paying Quantities on the
Leased Area, this Lease will not expire because Lessee fails to produce that Oil or Gas
unless University gives notice to Lessee, allowing a reasonable time, which will not be
less than SIX (6) MONTHS after notice, to place the well into production, and Lessee
fails to do so. If production is established within the time allowed, this Lease is extended
only for so long as Oil or Gas is produced in Paying Quantities from the Leased Area.
The presence of shut-in wells that may have existed on the Leased Area prior to the
effective date of this Lease shall not constitute grounds for extension of the primary term.
D. If the University directs or approves in writing a suspension of all operations on
or production from the Leased Area (except for a suspension necessitated by Lessee’s
conduct or negligence), or if a suspension of all operations on or production from the
Leased Area has been ordered under federal, state, or local law, Lessee’s obligation to
comply with any express or implied provision of this Lease requiring operations or
production will be suspended, but not voided, and Lessee shall not be liable for damages
for failure to comply with that provision. If the suspension occurs before the expiration
of the primary term, the primary term will be extended at the end of the period of the
suspension by adding the period of time lost under the primary term because of the
suspension. If the suspension occurs during an extension of the primary term under this
Paragraph, upon removal of the suspension, Lessee will have a reasonable time, which
will not be less than SIX (6) MONTHS after notice that the suspension has been
removed, to resume operations or production. For purposes of this Paragraph 4.D, any
suspension of operations or production specifically required or imposed as a term of sale
or by any stipulation made a part of this Lease will not be considered a suspension
ordered by law.
If the University determines that Lessee has been prevented by Force Majeure, after
efforts made in good faith, from performing any act that would extend the Lease beyond
the primary term, this Lease will not expire during the period of Force Majeure. If the
Force Majeure occurs before the expiration of the primary term, the primary term will be
extended at the end of the period of Force Majeure by adding the period of time lost
under the primary term because of the Force Majeure. If the Force Majeure occurs
during an extension of the primary term under this Paragraph, this Lease will not expire
during the period of Force Majeure plus a reasonable time after that period, which will
not be less than SIXTY (60) DAYS, for Lessee to resume operations or production.
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E. Nothing in Paragraphs 4.D or 4.E suspends the obligation to pay royalties or other
production or profit-based payments to the University from operations on the Leased
Area that are not affected by any suspension or Force Majeure, or suspends the obligation
to pay rent.
5. RENT.
A. Lessee shall pay annual rent to the University in accordance with the following
rent schedule:
(i) first year, $2.00 per acre or fraction of an acre;
(ii) second year, $3.00 per acre or fraction of an acre;
(iii) third year, $4.00 per acre or fraction of an acre;
(iv) fourth year, $5.00 per acre or fraction of an acre;
(v) fifth year, $6.00 per acre or fraction of an acre;
(vi) Any Subsequent Years - The University may increase the annual rent as a
condition to extend the Oil & Gas Lease beyond Year Five (5).
B. Annual rent, paid in advance, is a credit on the royalty share due under the Lease
for that year.
C. Lessee shall pay the annual rent to the University, without demand, in advance, on
or before the annual anniversary date of this Lease. The University is not required to
give notice that rent is due by billing the Lessee. If the University is not open for
business on the annual anniversary date of this Lease, the deadline rent for payment is
extended to include the next day on which the University is open for business. If the
annual rent is not paid on or before the due date, this Lease automatically terminates at
11:59 p.m., Alaska Standard Time, on the due date. Termination does not relieve Lessee
from its obligations accruing hereunder prior to such termination.
6. RECORDS. Lessee shall keep and have in its possession books and records showing the
development and production (including records of development and production expenses) and
disposition (including records of sales prices, volumes, and purchasers) of all Oil, Gas, and
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Associated Substances produced from the Leased Area. Lessee shall permit University or its
agents to examine these books and records at all reasonable times. Upon request by the
University, Lessee’s books and records shall be made available to University at the University’s
office designated by the University. These books and records of development, production, and
disposition must employ methods and techniques that will ensure the most accurate figures
reasonably available without requiring Lessee to provide separate tankage or meters for each
well. Lessee shall use generally accepted accounting procedures consistently applied.
7. APPORTIONMENT OF ROYALTY FROM APPROVED UNIT. The University’s
royalty share of any unit production allocated to the Leased Area will be regarded as royalty to
be distributed to, or the proceeds of it paid to, the University, free and clear of all unit expenses
(and any portion of those expenses incurred away from the unit area), including, but not limited
to, expenses for separating, cleaning, dehydration, gathering, saltwater disposal, and preparing
Oil, Gas, or Associated Substances for transportation off the unit area, and free of any lien for
them.
8. PAYMENTS. All payments to the University under this Lease must be made payable to
the University of Alaska in the manner directed by the University, and unless otherwise
specified, must be tendered to the University at the following address:
UNIVERSITY OF ALASKA
Land Management
1815 Bragaw Street, Suite 101
Anchorage, Alaska 99508-3438
The University shall provide the Lessee with advance written notice of any change in address
pursuant to a notice under Paragraph 26.
9. PLAN OF OPERATIONS.
A. Except as provided in Paragraph 9.B below, no Lease operations may be
undertaken on the Leased Area until a written plan of operations has been approved by
the University. Lessee shall file with the University for its separate approval as to
operations to be conducted on the Leased Area any plan of operations filed with the State
of Alaska covering operations on the Leased Area.
B. A lease plan of operations will not be required by the University for lease
operations undertaken under a unit plan of operations approved by the State of Alaska
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under 11 AAC. Lessee shall file with the University an informational copy of any unit
plan of operations filed with the State of Alaska covering operations on the Leased Area.
C. An application for approval of a plan of operations must contain sufficient
information, based on data reasonably available at the time the plan is submitted for
approval, for the University to determine the surface use requirements and impacts
directly associated with the proposed operations. An application must include statements
and maps or drawings setting out the following:
(i) the sequence and schedule of the operations to be conducted on the Leased
Area, including the date operations are proposed to begin and their proposed
duration;
(ii) projected use requirements directly associated with the proposed
operations, including but not limited to the location and design of well sites,
material sites, water supplies, solid waste sites, sumps, buildings, roads, utilities,
airstrips, and all other facilities and equipment necessary to conduct the proposed
operations;
(iii) plans for rehabilitation of the affected Leased Area after completion of
operations or phases of those operations;
(iv) a description of operating procedure designed to prevent or minimize
adverse effects on other natural resources and other uses of the Leased Area and
adjacent areas, including fish and wildlife habitats, and historic and
archaeological sites; and
(v) a list of all permits, whether federal, state, local, or private, that have been
or are anticipated to be obtained by Lessee to allow the proposed operations to be
accomplished.
D. In approving a lease plan of operations, or an amendment of a plan, the University
may require amendments it determines necessary to protect the University’s interests.
The University will not require any amendment that would be inconsistent with the terms
of the Lease itself, or would deprive Lessee of reasonable use of the leasehold interest.
E. Lessee may, with the written approval of the University, amend an approved plan
of operations.
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F. Approval by the University of a plan of operations or any modifications of a plan
of operations signifies only that the University has no objection to the operations outlined
in the plan from the standpoint of the lease administrator and does not relieve Lessee of
its obligation to obtain approvals and permits required by governmental agencies having
regulatory authority over those operations.
G. All of Lessee’s operations on the Leased Area must be in conformance with the
approved plan of operations, and shall comply with the State of Alaska’s Mitigation
Measures for the State of Alaska 2011 Cook Inlet Areawide Part A Oil and Gas Lease
Sale (“Mitigation Measures”), except that said Mitigation Measures shall not enlarge any
right granted by this Lease. Without limitation to the foregoing, said Mitigation
Measures do not authorize the use or occupancy of the surface of the Leased Area.
Surface entry, use or occupancy of the Leased Area shall be conducted only pursuant to a
written permit issued by the University, which may be granted, denied or conditioned by
the University in its sole discretion. Any requirement of the Mitigation Measures for the
consent, satisfaction, approval, or permission of or consultation with “the director,”
“ADF&G,” “DMLW” or any other State department, agency or office shall for purposes
of this Lease, be deemed to require the consent, satisfaction, approval, or permission of or
consultation with the University’s Director of Land Management. In addition to the
applicable Mitigation Measures, Lessee must comply with all applicable local, state and
federal codes, statutes and regulations, as amended, including all applicable permitting
requirements.
H. The University’s approval of a plan of operations that may include activities on
non-University owned land shall not operate to ratify or approve in any way Lessee’s
plan of operations or actions as they pertain to those activities and the Lessee’s right to
engage in those activities on, in or under land not owned by the University. Nothing
contained in this Paragraph 9 expands or grants to Lessee any right to use the surface
estate of the Leased Area.
I. Upon completion of operations, Lessee shall inspect the area of operations and
submit a report indicating the completion date of operations and stating any
noncompliance of which Lessee knows, or should reasonably know, with requirements
imposed as a condition of approval of the plan.
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10. PLAN OF DEVELOPMENT.
A. Except as provided in Paragraph 10.D below, within TWELVE (12) MONTHS
after certification by the University of a well capable of producing Oil, Gas, or
Associated Substances in Paying Quantities, Lessee shall file an application for approval
by the University of an initial plan of development that must describe Lessee’s plans for
developing the Leased Area. No development of the Leased Area may occur until a plan
of development has been approved by the University. Lessee shall file with the
University for its separate approval as to operations to be conducted on the Leased Area
any plan of development filed with the State of Alaska covering operations on the Leased
Area.
B. The plan of development must be revised, updated, and submitted to the
University for approval annually before or on the anniversary date of the previously
approved plan. If no changes from an approved plan are contemplated for the following
year, a statement to that effect must be filed for approval in lieu of the required revision
and update.
C. Lessee may, with the written approval of the University, subsequently modify an
approved plan of development.
D. During any period when the Leased Area is included in an approved unit, Lessee
will not be required to submit to the University for its approval a separate lease plan of
development for unit activities. However, during such time periods the Lessee shall
provide to the University an informational copy of any plan of development filed with the
state covering development of the Leased Area.
11. LOGS AND OTHER RECORDS OF OPERATIONS.
A. Lessee shall maintain and make available to the University or its agent(s), at the
University’s request, for review at Lessee’s Alaska offices during normal business hours,
all logs, geological and geophysical surveys taken, a description of all tests run for each
well drilled on the Leased Area, and a plat showing the exact location of each well,
within THIRTY (30) DAYS after each well or survey has been completed, suspended, or
abandoned. Lessee shall, within THIRTY (30) DAYS of a written request from the
University, provide the University copies for its retention of such logs, geological and
geophysical surveys taken, a description of all tests run for each well drilled on the
Leased Area, and a plat showing the exact location of each well.
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B. Any information obtained by the University or filed by Lessee with the University
in connection with this Lease will be available at all times for the use of the University
and its agents.
12. DIRECTIONAL DRILLING. This Lease may be maintained in effect by directional
wells whose bottom hole location is on the Leased Area but that are drilled from locations on
other lands not covered by this Lease. In those circumstances, Drilling will be considered to
have commenced on the Leased Area when actual Drilling is commenced on those other lands
for the purpose of directionally Drilling into the Leased Area. Production of Oil or Gas from the
Leased Area through any directional well surfaced on those other lands, or Drilling or reworking
of that directional well, will be considered production or Drilling or Reworking Operations on
the Leased Area for all purposes of this Lease. Nothing contained in this Paragraph is intended
or will be construed as granting to Lessee any interest, license, easement, or other right in or with
respect to those lands in addition to any interest, license, easement, or other right that Lessee
may have lawfully acquired from the University or from others.
13. DILIGENCE AND PREVENTION OF WASTE.
A. Lessee shall exercise reasonable diligence in Drilling, producing, and operating
wells on the Leased Area unless consent to suspend operations temporarily is granted by
the University.
B. Upon discovery of Oil or Gas on the Leased Area in quantities that would appear
to a reasonable and prudent operator to be sufficient to recover ordinary costs of Drilling,
completing, and producing an additional well in the same geologic structure at another
location with a reasonable profit to the operator, Lessee must drill those wells as a
reasonable and prudent operator would drill, having due regard for the interest of the
University as well as the interest of Lessee.
C. Lessee shall perform all operations under this Lease in a good and workmanlike
manner in accordance with the methods and practices set out in the approved plan of
operations and plan of development, with due regard for the prevention of waste of Oil,
Gas and Associated Substances, and the entrance of water to Oil or Gas-bearing sands or
strata, to the destruction or injury of those sands or strata, and to the preservation and
conservation of the property for future productive operations. Lessee shall carry out at
Lessee’s expense all orders and requirements of University relative to the prevention of
waste and to the preservation of the Leased Area. If Lessee fails to carry out these
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orders, University will have the right, together with any other available legal recourse, to
enter the Leased Area to repair damage or prevent waste at Lessee’s expense.
D. Lessee shall securely plug, in a manner approved by the State of Alaska, any and
all wells before abandoning them.
14. OFFSET WELLS. Lessee shall drill such wells as a reasonable and prudent operator
would drill to protect the University from loss by reason of drainage resulting from production
on other land. Without limiting the generality of the foregoing sentence, if Oil or Gas is
produced in a well on other land not owned by University or on which the University receives a
lower rate of royalty than under this Lease, and that well is within ONE THOUSAND FIVE
HUNDRED (1,500) FEET of the lands then subject to this Lease, and that well produces Oil or
Gas for a period of THIRTY (30) CONSECUTIVE DAYS in quantities that would appear to a
reasonable and prudent operator to be sufficient to recover ordinary costs of Drilling,
completing, and producing an additional well in the same geological structure at an offset
location with a reasonable profit to the operator, and if, after notice to Lessee and an opportunity
to be heard, University finds that production from that well is draining lands then subject to this
Lease, Lessee shall within THIRTY (30) DAYS after written demand by the University begin in
good faith and diligently prosecute Drilling operations for an offset well on the Leased Area. In
lieu of Drilling any well required by this Paragraph, Lessee may, with the University’s consent,
compensate the University in full each month for the estimated loss of royalty through drainage
in the amount determined by the University.
15. UNITIZATION.
A. The Lessee may unite with others, jointly or separately, in collectively adopting
and operating under a cooperative or unit agreement for the exploration, development or
operation of the pool or field or like area or part of the pool, field or like area that
includes or underlies the leased area or any part of the leased area whenever the State of
Alaska determines that the cooperative or unit agreement is in the public interest.
B. The Lessee agrees, within SIX (6) MONTHS after demand by the University, to
subscribe to such a cooperative or unit agreement, which agreement shall be reasonable
and shall adequately protect all parties in interest including the University.
C. With the consent of the University and Lessee, and if the Leased Area is
committed to a unit agreement approved by the State of Alaska, the State of Alaska may
establish, alter, change, or revoke Drilling and producing requirements of this Lease as
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the State of Alaska may determine to be necessary or proper to secure the proper
protection of the public interest, and to be consistent with the State of Alaska’s trust duty
to the University and its lands.
D. Except as otherwise provided in this Paragraph 15.D, where only a portion of the
Leased Area is committed to a unit agreement approved or prescribed by the State of
Alaska, that commitment constitutes a severance of this Lease as to the unitized and non-
unitized portions of the Leased Area. The portion of the Leased Area not committed to
the unit will be treated as a separate and distinct lease having the same effective date as
this Lease and may be maintained only in accordance with the terms and conditions of
this Lease. Any portion of the Leased Area not committed to the unit agreement will not
be affected by the unitization or pooling of any other portion of the Leased Area by
operations in the unit, or by suspension approved or ordered for the unit. If the Leased
Area has a well certified by the University as capable of production in Paying Quantities
on it before commitment to a unit agreement, this Lease will not be severed. If any
portion of this Lease is included in a participating area formed under a unit agreement,
the entire Leased Area will remain committed to the unit and this Lease will not be
severed.
16. INSPECTION. Lessee shall keep open at all reasonable times, for inspection by any
duly authorized representative of the University, the Leased Area, all wells, improvements,
machinery, and fixtures on the Leased Area, and all reports and records relative to operations and
surveys or investigations on or with regard to the Leased Area or under this Lease. Upon
request, Lessee shall furnish the University with copies of any extracts from any such reports and
records.
17. SUSPENSION. The University may from time to time direct or approve in writing
suspension of production or other operations under this Lease.
18. ASSIGNMENT, PARTITION, AND CONVERSION. Lessee may not assign this
Lease, or any interest therein, or otherwise convey or dispose of any interest in this Lease, or
Lessee’s rights to operate pursuant to this Lease (“Assign” or “Assignment”), without the prior
written consent of the University, which consent may be withheld in the University’s sole
discretion. No assignment, sublease, or other transfer of an interest in this Lease, including
assignments of working or royalty interests and operating agreements and subleases, will be
valid unless approved in writing by the University. Assignment without the University’s
approval shall be void and not merely voidable. Such an Assignment shall only be made to an
assignee determined by the University to be capable of performing all the obligations of Lessee
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under this Lease, based upon factors including, but not limited to, the proposed assignee’s
financial and management resources, oil and gas operating experience, and record of
environmental compliance. Lessee shall furnish to the University at least SIXTY (60) DAYS
prior notice of the proposed Assignment and full information concerning the capability of the
proposed assignee to perform its obligations under this Lease and otherwise satisfy these
requirements. No Assignment shall be valid and enforceable unless the assignee agrees in writing
to assume and agrees to perform all the obligations of the Lessee. The University may approve
such an Assignment in writing, subject to conditions reasonably necessary to protect its best
interests. Assignment for purposes of this Paragraph shall include, but not be limited to, any
change in the structure of or the ownership of shares or stock or other interests in Lessee such
that control of the affairs of Lessee is transferred to persons other than those exercising such
control on the date of execution of this Lease or on the date of the University’s approval of the
immediately prior Assignment. Except where the University determines it necessary that the
assigning Lessee continue to guarantee the assignee’s obligations hereunder in order to protect
the University’s best interests, the Lessee shall not be liable to the University for any obligation
arising under this Lease to the extent such obligation arises after approval by the University of an
Assignment by Lessee of all its rights pursuant to this Paragraph. Lessee shall remain liable for
all obligations under this Lease accruing prior to the approval by the University of any
Assignment of this Lease. All provisions of this Lease will extend to and be binding upon the
heirs, administrators, successors, and assigns of the University and Lessee. Where an
Assignment is made of all or a part of Lessee’s interest in a portion of the Leased Area, including
without limitation, in a separate and distinct zone or geological horizon, this Lease may, at the
option of University or upon request of the transferee and with the approval of the University, be
severed, and a separate and distinct Lease be issued to the transferee having the same effective
date and terms as this Lease. All costs incurred by the University in reviewing applications for
the transfer of this Lease, including reasonable administrative charges and costs of reviewing the
background, skills, financial position and references of the proposed transferee, shall be paid for,
in advance, by Lessee.
19. SURRENDER. Lessee, at any time, may file with the University a written surrender of
all rights under this Lease or any portion of the Leased Area comprising one or more legal
subdivisions, or, with the consent of the University, any separate and distinct zone or geological
horizon underlying the Leased Area or one or more legal subdivisions of the Leased Area. That
surrender will be effective as of the date of filing, subject to the continued obligations of Lessee
and its surety to make payment of all accrued rentals and royalties and to place all wells and
surface facilities on the surrendered land or in the surrendered zones or horizons in a condition
satisfactory to the University for suspension or abandonment. After that, Lessee will be released
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from all obligations under this Lease with respect to the surrendered lands, zones, or horizons,
except those theretofore accrued.
20. DEFAULT AND TERMINATION; CANCELLATION.
A. Upon default by Lessee of any term or provision of this Lease, the University, in
addition to all other rights available to it at law or in equity, at its sole option may declare
in writing its intention to terminate this Lease unless Lessee cures the default. Lessee
must start work to cure the default within the period specified by the University in the
notice and thereafter diligently and successfully cure the default. If, in the University’s
sole discretion, Lessee’s default causes an emergency, the University shall declare the
emergency nature of the default in a written notice to Lessee. Upon receipt of the
University’s notice, Lessee shall commence curing the default within EIGHT (8)
HOURS and shall successfully complete the cure within FORTY-EIGHT (48) HOURS
of receiving the notice. If the University determines, in its sole discretion, that it is
impracticable to cure the emergency within the time specified in the notice despite
Lessee’s best efforts, then Lessee must cure the default as soon as possible. Should
Lessee fail to take the action necessary to correct the default within the time specified in
the notice, this Lease shall terminate at the expiration of the notice period, without further
notice, and the University shall owe Lessee nothing upon such termination. Failure of the
University to enforce any of the provisions of this Lease or to exercise any option in this
Lease, or to require strict performance by Lessee of any of the provisions of this Lease,
shall not constitute a waiver of those provisions or options. If Lessee fails to cure any
default of the provisions of this Lease, the University, in addition to all other rights
available to it at law or in equity, shall have the right to cure the default and charge
Lessee for all costs associated with the cure of the default.
B. The University may cancel this Lease at any time the University determines, after
Lessee has been given notice and a reasonable opportunity to be heard, that (i) continued
operations pursuant to this Lease probably will cause harm or damage to biological
resources, to property, to mineral resources, or to the environment (including the human
environment), (ii) the threat of harm or damage will not disappear or decrease to an
acceptable extent within a reasonable period of time, and (iii) the advantages of
cancellation outweigh the advantages to the University of continuing this Lease in effect.
Any cancellation under this Paragraph 20.B will not occur unless and until operations
under this Lease have been under suspension or temporary prohibition by the University,
with due extension of the term of this Lease, continuously for a period of FIVE (5)
YEARS or for a lesser period upon request of Lessee. Any cancellation by the
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University under this Paragraph 20.B will entitle Lessee to receive compensation as
Lessee demonstrates to the University is equal to the lesser of (i) the value of the
canceled rights as of the date of cancellation, with due consideration being given to both
anticipated revenues from this Lease and anticipated costs, including costs of compliance
with all applicable regulations and stipulations, liability for clean-up costs or damages,
and all other costs reasonably anticipated under this Lease, or (ii) the excess, if any, over
Lessee’s revenues from this Lease (plus interest on the excess from the date of receipt to
date of reimbursement) of all consideration paid for this Lease and all direct expenditures
made by Lessee after the effective date of this Lease and in connection with exploration
or development, or both, under this Lease, plus interest on that consideration and those
expenditures from the date of payment to the date of reimbursement.
21. RIGHTS UPON TERMINATION. To the extent that Lessee has entered upon the
surface of the Leased Area under a separate permit from the University, then immediately upon
the expiration or earlier termination of this Lease, Lessee shall remove from the surface of the
Leased Area all its machinery, equipment, tools, and materials. Any machinery, equipment,
tools, and materials that Lessee has not removed from the Leased Area shall, at the sole option of
the University, become the property of the University free and clear of all claims against them by
Lessee or any third party. At the sole option of the University, all improvements such as roads,
pads, and wells must either be abandoned and the sites rehabilitated by Lessee to the satisfaction
of the University, or be left intact and Lessee absolved of all further responsibility as to their
maintenance, repair, and eventual abandonment and rehabilitation. Subject to the above
conditions, Lessee shall deliver up the Leased Area or those portions of the Leased Area and the
surface of the Lease Area in good condition similar to the condition at the commencement of the
Lease. This Paragraph shall not enlarge any right granted by this Lease. Without limitation to
the foregoing, this Paragraph does not authorize the use or occupancy of the surface of the
Leased Area in a manner not otherwise granted by this Lease.
22. INDEMNIFICATION.
A. Lessee shall perform all of its obligations and carry on all of its operations and
activities of any kind or nature whatsoever on the Leased Area entirely at its own risk and
responsibility. Lessee shall indemnify, defend and hold the University, its Board of
Regents, officers, employees, agents and representatives harmless from and against any
and all loss, expense, damage, claim, demand, judgment, fee, charge, lien, liability,
action, cause of action or proceedings of any kind whatsoever on account of damage to or
loss of property, or personal injury, emotional distress or death arising directly or
indirectly in connection with the performance, activities or operations of Lessee, its
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employees, agents, representatives, contractors, subcontractors and invitees. This
indemnification does not apply where the injury is caused by the University’s sole
negligence or intentional misconduct. This indemnification applies before and after
Lessee’s activities and operations on the Leased Area and shall survive any termination
or expiration of this Lease. In the event any part of this indemnification clause is
determined to be contrary to law or public policy, Lessee agrees to provide the University
with the maximum indemnification allowed by law.
B. Lessee expressly waives any defense to any action and expressly agrees to assume
responsibility for breach of a provision of this Lease or for damages resulting from harm
to the environment that is based on an act or omission committed by an independent
contractor in Lessee’s employ, as if Lessee had taken such actions.
C. The University shall not be responsible under this Lease for any loss, cost,
damage or injury caused or resulting from actions, omissions, or the withholding of
consents by any entity with respect to operations by Lessee under this Lease.
23. SECURITY AND PERFORMANCE BOND.
A. Lessee shall furnish a bond naming the University as beneficiary prior to the
commencement of Lease operations under this Lease in an amount equal to at least ONE
HUNDRED THOUSAND AND NO/100 DOLLARS ($100,000.00), and shall maintain
that bond as long as required by the University.
B. Lessee may, in lieu of the bond required under Paragraph 23.A above, furnish and
maintain a statewide bond in the amount of ONE HUNDRED THOUSAND AND
NO/100 DOLLARS ($100,000.00) naming the University as beneficiary, in accordance
with any applicable University requirements;
C. The University may require a bond naming the University as beneficiary in a
reasonable amount greater than the amount specified above, where a greater amount is
justified by the nature of Lessee’s uses and the degree of risk involved in the types of
operations being or proposed to be carried out under this Lease. A statewide bond
naming the University as beneficiary will not satisfy any requirement of a bond imposed
under this Paragraph 23.C, but will be considered by the University in determining the
need for and the amount of any additional bond under this Paragraph 23.C.
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D. If the Leased Area is committed in whole or in part to a cooperative or unit
agreement approved or prescribed by the University or the Alaska Oil and Gas
Conservation Commission, and the unit operator furnishes a statewide bond naming the
University as beneficiary, Lessee need not maintain a separate bond as to the University
with respect to the portion of the Leased Area committed to the cooperative or unit
agreement.
24. CONSULTATION. Upon request of the University, the University and Lessee shall
meet at least annually to review operations under this Lease. Such a meeting shall consist of a
review presented by Lessee of operations in the preceding year and a presentation of proposed
operations for the succeeding year. There shall be opportunity for University and Lessee to
discuss any problems that have arisen during operations under this Lease.
25. AUTHORIZED REPRESENTATIVES. The Director of the University of Alaska
Land Management and the person executing this Lease on behalf of Lessee shall be authorized
representatives for their respective principals for the purposes of administering this Lease.
University or Lessee may change the designation of its authorized representatives or the address
to which notices to that representative are to be sent by a notice given in accordance with
Paragraph 26 below. Where activities pursuant to a plan of operations are underway, Lessee
shall also designate, pursuant to a notice under Paragraph 26 below, by name, job title, and
address, an agent who will be present in the state during all Lease activities.
26. NOTICES. Any notices required or permitted under this Lease must be in writing and
must be given personally or by registered or certified mail, return receipt requested, addressed as
follows:
UNIVERSITY: LESSEE:
Land Management
1815 Bragaw Street, Suite 101
Anchorage, AK 99508-3438
(907) 786-7766
27. STATUTES AND REGULATIONS. The Lessee shall perform its obligations and
undertakings pursuant to the terms of this Lease in accordance with and subject to all the
provisions of the constitution and laws of the State of Alaska, the United States of America, local
governmental entities and any applicable ordinances, regulations, rules and codes, now or
hereafter in effect during the term of this Lease. The parties agree that this Lease is intended to
be administered in a manner consistent with State of Alaska oil and gas leases. The parties also
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agree, unless the context requires otherwise, that the obligations of Lessee (including without
limitation those relative to its obligation to submit data to the University, and to the
establishment of royalty values and the deduction of transportation costs) shall be further defined
and interpreted by reference to the relevant State of Alaska Department of Natural Resources
regulations, as if they applied to this Lease.
28. INTEREST IN REAL PROPERTY. It is the intention of the parties that the rights
granted to Lessee by this Lease constitute an interest in real property in the Leased Area.
29. WAIVER OF CONDITIONS. The University reserves the right to waive any breach of
a provision of this Lease, but any such waiver extends only to the particular breach so waived
and does not limit the rights of the University with respect to any future breach; nor will the
waiver of a particular breach prevent cancellation of this Lease for any other cause or for the
same cause occurring at another time. Notwithstanding the foregoing, the University will not be
deemed to have waived a provision of this Lease unless it does so in writing.
30. SEVERABILITY. If any provision of this Lease or any application thereof shall be
invalid or unenforceable, the remainder of this Lease and any other application of such provision
shall not be affected thereby.
31. DEFINITIONS. All words and phrases used in this Lease are to be interpreted where
possible in the manner required in respect to the interpretation of statutes by AS 01.10.040.
However, the following words have the following meanings unless the context unavoidably
requires otherwise:
A. “Oil” means crude petroleum oil and other hydrocarbons, regardless of gravity,
that are produced in liquid form by ordinary production methods, including liquid
hydrocarbons known as distillate or condensate recovered by separation from Gas other
than at a gas processing plant;
B. “Gas” means all natural gas (except helium gas) and other hydrocarbons produced
that are not defined in this Lease as Oil. However, notwithstanding anything contained
herein to the contrary, the term “gas” specifically excludes coalbed methane or other
gaseous substances produced or producible by in situ extraction methods from coal
seams;
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C. “Associated Substances” means all substances except helium produced as an
incident of production of Oil or Gas by ordinary production methods and not defined in
this Lease as Oil or Gas;
D. “Drilling” means the act of boring a hole to reach a proposed bottom hole location
through which Oil or Gas may be produced if encountered in paying quantities, and
includes redrilling, sidetracking, deepening, or other means necessary to reach the
proposed bottom hole location, testing, logging, plugging, and other operations necessary
and incidental to the actual boring of the hole;
E. “Reworking Operations” means all operations designed to secure, restore, or
improve production through some use of a hole previously drilled, including, but not
limited to, mechanical or chemical treatment of any horizon, plugging back to test higher
strata, etc.;
F. “Paying Quantities” means quantities sufficient to yield a return in excess of
operating costs, even if Drilling and equipment costs may never be repaid and the
undertaking considered as a whole may ultimately result in a loss; quantities are
insufficient to yield a return in excess of operating costs unless those quantities, not
considering the costs of transportation and marketing, will produce sufficient revenue to
induce a prudent operator to produce those quantities. The University shall certify the
presence of Paying Quantities in its reasonable discretion;
G. “Force Majeure” means war, riots, acts of God, unusually severe weather, or any
other cause beyond Lessee’s reasonable ability to foresee or control and includes
operational failure of existing transportation facilities and delays caused by judicial
decisions or lack of them. This provision shall in no way be construed so as to excuse (i)
Lessee’s obligations to maintain the Leased Area and improvements, or (ii) the timely
payment of taxes, special assessments, insurance premiums or obligations to pay money
that are treated as Rent or Royalties.
32. ROYALTY ON PRODUCTION. Lessee shall pay a total royalty for the Leased Area
of TWELVE AND ONE-HALF PERCENT (12 – 1/2%) in amount or value of the Oil, Gas,
and Associated Substances saved, removed, or sold from the Leased Area and of the Gas from
the Leased Area used on the Leased Area for extraction of natural gasoline or other products.
33. VALUE.
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A. For the purposes of computing royalties due under this Lease, the value of royalty
Oil, Gas, or Associated Substances shall not be less than the highest of:
(i) the field price received by Lessee for the Oil, Gas, or Associated
Substances;
(ii) the volume-weighted average of the THREE (3) highest field prices
received by other producers in the same field or area for Oil of like grade and
gravity, Gas of like kind and quality, or Associated Substances of like kind and
quality at the time the Oil, Gas, or Associated Substances are sold or removed
from the Leased Area or unit area or the Gas is delivered to an extraction plant if
that plant is located on the Leased Area or unit area; if there are less than THREE
(3) prices reported by other producers, the volume-weighted average will be
calculated using the lesser number of prices received by other producers in the
field or area;
(iii) Lessee’s posted price in the field or area for the Oil, Gas, or Associated
Substances; or
(iv) the volume-weighted average of the THREE (3) highest posted prices in
the same field or area of the other producers in the same field or area for Oil of
like grade and gravity, Gas of like kind and quality, or Associated Substances of
like kind and quality at the time the Oil, Gas, or Associated Substances are sold or
removed from the Leased Area or unit area or the Gas is delivered to an extraction
plant if that plant is located on the Leased Area or unit area; if there are less than
THREE (3) prices posted by other producers, the volume-weighted average will
be calculated using the lesser number of prices posted by other producers in the
field or area.
(v) the value for royalty purposes reported to and accepted by the State of
Alaska Department of Natural Resources for the same production month for Oil
of like grade and gravity, Gas of like kind and quality, or Associated Substances
of like kind and quality and which is produced from any state oil and gas lease
located within an oil & gas unit established by the State of Alaska (or any
successor unit) which also contains all or any portion of this Lease, including any
subsequent revision of such value for royalty purposes. When Lessee makes its
monthly report of production and royalty payments and royalty values to the
University under this Lease or any revision thereto, Lessee shall also provide to
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the University copies of all royalty and royalty value reports for that same
production month issued to the State of Alaska (and any revisions thereto) for Oil
of like grade and gravity, Gas of like kind and quality, or Associated Substances
of like kind and quality produced from all State oil and gas leases included within
the exterior boundaries of the unit, if any, on the date of this Lease, subject to
suitable confidentiality requirements where necessary and allowed by law. When
it provides revised payments and royalty reports to the State of Alaska for Oil of
like grade and gravity, Gas of like kind and quality, or Associated Substances of
like kind and quality which are produced from any State oil and gas lease which is
located within the exterior boundaries of the unit, if any, on the date of this Lease,
Lessee shall provide such revised state royalty reports and evidence of such
payments to the University, and to the extent application of this Paragraph
33.A.(v) to such revised values results in the highest royalty value pursuant to this
Paragraph 33.A for such production month, Lessee shall make revised royalty
payments to the University for Oil, Gas, or Associated Substances produced from
this Lease for the same production month on the basis of the revised royalty
reports and payments issued to the state, notwithstanding when such revised
payments or reports are made or filed with the state.
B. If Oil, Gas, or Associated Substances are sold away from the Leased Area or unit
area, the term “field price” in Paragraph 33.A above will be the cash value of all
consideration received by Lessee or other producer from the purchaser of the Oil, Gas, or
Associated Substances, less the reasonable costs of transportation away from the leased
or unit area to the point of sale. The “reasonable costs of transportation” are as defined in
11 AAC 83.228 and 11 AAC 83.229 as those regulations exist on the effective date of
this Lease.
C. In the event Lessee does not sell in an arm’s-length transaction the Oil, Gas, or
Associated Substances, the term “field price” in Paragraphs 33.A and 33.B above will
mean the price, on the Leased Area or unit area, Lessee would expect to receive for the
Oil, Gas, or Associated Substances if Lessee did sell the Oil, Gas, or Associated
Substances in an arm’s-length transaction, minus reasonable costs of transportation away
from the Leased Area or unit area to the point of sale or other disposition. Lessee must
determine this price in a consistent and logical manner using information available to
Lessee and report that price to the University.
D. The University may establish minimum values for the purposes of computing
royalties on Oil, Gas, or Associated Substances obtained from this Lease, with
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consideration being given to the price actually received by Lessee, to the price or prices
paid in the same field or area for production of like quality, to posted prices, to prices
received by Lessee and/or other producers from sales occurring away from the Leased
Area, and/or to other relevant matters. In establishing minimum values, the University
may use, but is not limited to, the methodology for determining “prevailing value” as
defined in 11 AAC 83.227. Each minimum value determination will be made only after
Lessee has been given notice and a reasonable opportunity to be heard. Under this
provision, it is expressly agreed that the minimum value of royalty Oil, Gas, or
Associated Substances under this Lease may not necessarily equal, and may exceed, the
price of the Oil, Gas, or Associated Substances.
34. ROYALTY IN VALUE. Except to the extent the University elects to receive all or a
portion of its royalty in kind as provided in Paragraph 35 below, Lessee shall pay to the
University that value of all royalty Oil, Gas, and Associated Substances as determined under
Paragraph 33 above. Royalty paid in value will be free and clear of all lease expenses (and any
portion of those expenses that is incurred away from the Leased Area), including, but not limited
to, expenses for separating, cleaning, dehydration, gathering, saltwater disposal, and preparing
the Oil, Gas, or Associated Substances for transportation off the Leased Area. All royalty that
may become payable in money to University must be paid on or before the last day of the
calendar month following the month in which the Oil, Gas, or Associated Substances are
produced. The amount of all royalty in value payments which are not paid when due under this
Lease or which are subsequently determined to be due as the result of a redetermination will bear
interest from the date the obligation accrued, until obligation is paid in full at a variable annual
rate equal to FOUR (4.00%) PERCENT plus the prime rate announced from time to time by
the Bank of America, San Francisco, California. Royalty payments must be accompanied by run
tickets or other information relating to valuation of royalty as the University may require which
may include, but is not limited to, run tickets, evidence of sales, shipments, and amounts of gross
Oil, Gas, and Associated Substances produced.
35. ROYALTY IN KIND.
A. At the University’s option, which may be exercised from time to time upon not
less than NINETY (90) DAYS notice to Lessee, Lessee shall deliver all or a portion of
the University’s royalty Oil, Gas, or Associated Substances produced from the Leased
Area in kind. Delivery will be on the Leased Area, unit area, or at a place mutually
agreed to by the University, and must be delivered to the University or to any individual,
firm, or corporation designated by the University.
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B. (i) Royalty Oil, Gas, or Associated Substances delivered in kind must be
delivered in good and merchantable condition, and be of pipeline quality, and free
and clear of all lease expenses (and any portion of those expenses incurred away
from the Leased Area), including, but not limited to, expenses for separating,
cleaning, dehydration, gathering, saltwater disposal, and preparing the Oil, Gas, or
Associated Substances for transportation off the Leased Area.
(ii) University, at its option, shall have the right to use Lessee’s existing
infield gathering system and other transportation facilities available to Lessee to
transport Lessor’s royalty Oil, Gas, or Associated Substances to the point of sale
or point of delivery to a royalty purchaser. For purposes of this subsection, “other
transportation facilities available to Lessee” shall include third party
transportation facilities to which Lessee has access, except where transportation
of such Oil, Gas, or Associated Substances is prohibited by Lessee’s
transportation agreements with such third parties, and transportation under such
agreements cannot be secured or accomplished without unreasonable burden on
Lessee. The cost to the University for transportation costs beyond the boundaries
of the Leased Area or unit area shall not exceed: (i) the actual cost to Lessee when
the transportation is by means of facilities owned by third parties; or (ii) when
transportation is by Lessee’s facilities, the lesser of (a) the reasonable cost to
Lessee, or (b) a cost equal to the lowest amount Lessee charges any third party for
use of such facilities. This Paragraph 35.B.(ii) shall not be construed to diminish
or limit the rights of the University under Paragraph 7 or Paragraph 35.B.(i), nor
to diminish or to limit any other rights which the University may possess pursuant
to this Lease.
C. After giving notice of its intention to take, or after having taken its royalty Oil,
Gas, or Associated Substances in kind, the University, at its option and upon NINETY
(90) DAYS’ notice to Lessee, may elect to receive a different portion or none of its
royalty in value. If, under federal regulations, the taking of royalty Oil, Gas, or
Associated Substances in value by the University creates a supplier-purchaser
relationship, Lessee hereby waives its right to continue to receive royalty Oil, Gas, or
Associated Substances under that relationship, and further agrees that it will require any
purchasers of the royalty likewise to waive any supplier-purchaser rights.
D. Lessee shall furnish storage for royalty Oil, Gas, or Associated Substances
produced from the Leased Area or unit area to the same extent that Lessee provides
storage for Lessee’s share of Oil, Gas and Associated Substances. Lessee shall not be
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liable for the loss or destruction of stored royalty Oil, Gas, or Associated Substances from
causes beyond Lessee’s reasonable control.
If a royalty purchaser refuses or for any reason fails to take delivery of or in an emergency, and
with as much notice to Lessee as is practical or reasonable under the circumstances, the
University may elect without penalty to underlift for up to SIX (6) MONTHS all or a portion of
the University’s royalty on Oil, Gas, or Associated Substances produced from the Leased Area or
unit area and taken in kind. The University’s right to underlift is limited to the portion of royalty
Oil, Gas, or Associated Substances that the royalty purchaser refused or failed to take delivery
of, or the portion necessary to meet the emergency condition. Underlifted Oil, Gas, or
Associated Substances may be recovered by the University at a daily rate not to exceed TEN
(10%) PERCENT of its royalty share of daily production at the time of the underlift recovery.
36. SURFACE USE. This Lease grants Lessee no rights to use, develop, or occupy the
surface estate of the Leased Area.
37. TAXES. This Lease may create certain interests, which may be subject to the payment
of taxes levied against such interests. Lessee shall be responsible to pay directly to the charging
authority, any and all real property taxes, general and special assessments and other charges
levied against the Leased Area, improvements or Lessee’s personal property, prior to the
delinquency date of said taxes, assessments and/or charges, to the full extent of installments
falling due during the term of this Lease, whether belonging to or chargeable against the
University or Lessee.
38. INSURANCE.
A. Insurance Requirements for Lessee and Lessee’s Contractor(s). Without
limiting Lessee’s indemnification, it is agreed that Lessee is required to carry and to
ensure that all of Lessee’s contractors carry and maintain in force at all times during the
term of this Lease, the insurance itemized below and shall provide certificates evidencing
such insurance to the University upon signing of this Lease and prior to Lessee’s or
Lessee’s contractors’ entry on the Leased Area. Lessee and Lessee’s contractors are
required to add the University as an additional insured to all policies, with the exception
of workers’ compensation. Lessee and Lessee’s contractors shall waive subrogation
against the University on all policies. At its discretion, Lessee may modify the insurance
requirements for Lessee’s contractors however; failure or inability to secure the required
minimum, or fully adequate insurance shall in no way relieve Lessee of the responsibility
for its own acts or the acts of Lessee’s contractors or subcontractors or any employees or
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agents of either. Where specific limits are shown, it is understood that they shall be the
minimum acceptable limits. If the Lessee’s policy contains higher limits, the University
shall be entitled to coverage to the extent of such higher limits. Coverage shall not be
suspended, voided, cancelled, reduced in coverage, reduced in limits below minimum
required limits, or non-renewed except after THIRTY (30) DAYS prior written notice to
the University. All liability policies required by this Lease must provide cross-liability
coverage as would be achieved under the standard ISO separation of insured’s clause.
Failure to furnish satisfactory evidence of insurance, lapse of a policy, or inadequate
limits, is a material breach and grounds for termination of this Lease. All endorsements
shall reference this Lease.
(i) Workers’ Compensation Insurance. Lessee and Lessee’s contractors
shall provide and maintain, for all of its employees engaged in work under this
Lease, Workers’ Compensation Insurance and Employer’s Liability Insurance in
accordance with the laws of the State of Alaska. Lessee and Lessee’s contractors
shall be responsible for Workers’ Compensation Insurance for any subcontractor
who directly or indirectly provides services under this Lease. This coverage must
include statutory coverage for states in which employees are engaging in work.
Where applicable, coverage for all federal acts (i.e., U.S.L. & H and Jones and
Harbor Acts) must also be included.
(ii) Commercial General Liability Insurance. Lessee and Lessee’s
contractors are required to provide Commercial General Liability (CGL)
insurance, on an occurrence basis, with limits of not less than ONE MILLION
AND NO/100 DOLLARS ($1,000,000.00) each occurrence and TWO
MILLION AND NO/100 DOLLARS ($2,000,000.00) aggregate not excluding
premises, operations, independent contractors, personal/advertising injury,
products-completed operations, liability assumed under an insured contract
(including defense costs and the tort liability of another assumed in a business
contract), broad form property damage, explosion, collapse, and underground
hazards, underground resources and equipment. Excess liability coverage shall be
purchased with a minimum per occurrence limit of TEN MILLION AND
NO/100 DOLLARS ($10,000,000) excess the general liability, auto liability,
employers liability, and environmental liability policies. This excess liability
insurance shall include excess pollution, underground resources and equipment.
The University shall be included as an additional insured under the CGL and
under the commercial umbrella. This insurance shall apply as primary insurance
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with respect to any other insurance or self-insurance programs afforded to the
University.
(iii) Business Automobile Coverage. Lessee and Lessee’s contractors are
required to maintain automobile liability insurance with limits of not less than
TWO MILLION AND NO/100 DOLLARS ($2,000,000.00) each accident.
Such insurance shall cover liability arising out of any auto (including owned,
hired, and non-owned autos). Coverage shall be written on standard ISO forms
from 1990 editions forward, or a substitute form providing equivalent liability
coverage. If such coverage is not provided in the base policy, the policy shall be
endorsed to provide contractual liability coverage equivalent to that provided in
the 1990 and later editions of CA 00 01. The University shall be included as an
additional insured.
(iv) Environmental Impairment Liability Insurance. Lessee shall purchase
and maintain in force for the duration of the contract insurance for pollution legal
liability applicable to bodily injury; property damage, including natural resource
damage, loss of use of damaged property or of property that has not been
physically injured or destroyed; cleanup costs, removal, storage, disposal, and or
use of the pollutant; and defense, including costs and expenses incurred in the
investigation, defense, or settlement of claims. Coverage shall be maintained in
an amount of at least TEN MILLION AND NO/100 DOLLARS
($10,000,000.00) per loss. Coverage shall apply to sudden and gradual pollution
conditions resulting from the escape or release of smoke, vapors, fumes, acids,
alkalis, toxic chemicals, liquids, or gases, natural gas, waste materials, or other
irritants, contaminants, or pollutants. The University shall be included as an
additional insured. If coverage is written on a claims-made basis, the Lessee
warrants that any retroactive date applicable to coverage under the policy
precedes the effective date of this Lease; and that continuous coverage will be
maintained or an extended discovery period will be exercised for a period of
TWO (2) YEARS beginning from the time that work under this Lease is
completed. The University will be provided additional insured status for the
duration of the two year extended discovery period.
(v) If aircraft are used in the operations to be performed hereunder, aviation
liability insurance with limits of TWENTY-FIVE MILLION AND NO/100
DOLLARS ($25,000,000.00) per occurrence, combined single limit for bodily
injury and property damage liability. This coverage shall include all owned, hired
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and non-owned aircraft. If Lessee operates an airstrip, airfield or other airport
facilities in the operations to be performed hereunder, the coverage shall include
airport liability.
(vi) If watercrafts are used in the operations to be performed hereunder,
watercraft liability insurance with limits of TWENTY-FIVE MILLION AND
NO/100 DOLLARS ($25,000,000.00) per occurrence, combined single limit for
bodily injury and property damage liability. This coverage shall include owned,
hired and non-owned watercraft.
(vii) Coverage for the cost of bringing a well under control in the event of a
blowout including resultant pollution, seepage or contamination and resultant
clean-up, cost to restore or re-drill a well due to blowout, crater or fire, and the
cost of extinguishing an oil and gas well fire, with minimum limits of TEN
MILLION AND NO/100 DOLLARS ($10,000,000.00).
B. Insurance Requirements for Subcontractor(s). Lessee is required to ensure
that all subcontractors carry workers’ compensation, commercial general liability and
business automobile insurance and shall provide certificates evidencing such insurance to
the University prior to any subcontractor’s entry on the Premises. All subcontractors are
required to add the University as an additional insured to all policies, with the exception
of workers’ compensation. All subcontractors are to waive subrogation against the
University on all policies. At its discretion, the Lessee or Lessee’s contractor may
determine the insurance requirements for subcontractors; however, failure or inability to
secure the required minimum, or fully adequate insurance shall in no way relieve Lessee
or Lessee’s contractor of the responsibility for its own acts or the acts of any
subcontractors or any employees or agents of either.
C. Delinquent Premiums. The University shall have the right, at its option, to pay
any delinquent premium upon any of Lessee’s or Lessee’s contractors’ or subcontractors’
insurance policies if found necessary to prevent a cancellation, non-renewal or material
alteration thereof; and Lessee agrees that it will, within TEN (10) DAYS, reimburse the
University therefore.
Failure to furnish satisfactory evidence of insurance or the lapse of a policy is a material breach
and grounds for termination of this Lease. All requirements regarding subcontractors or sub-
lessees contained within Paragraph 38 remain applicable.
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39. MECHANIC’S AND MATERIALMAN’S LIENS.
A. Lessee’s Obligation to Pay. Lessee shall pay or cause to be paid the total cost
and expense of all construction, alteration or repair of improvements which are or may be
affected by AS 34.35, et seq., as now enacted or as may hereafter be amended. No such
payment shall be construed as either Rent, Supplemental Payments or Additional Rent.
Lessee shall not suffer or permit to be enforced against the Leased Area or
improvements, any mechanic’s, materialman’s, laborer’s, contractor’s or subcontractor’s
lien arising from any such construction, alteration or repair. Lessee may, in good faith,
however, and at Lessee’s sole cost and expense, contest the validity of any such asserted
lien, provided Lessee has first recorded all appropriate bonds as required by law which
would permit the Leased Area to be freed from the effect of any such lien, within FIVE
(5) DAYS after suit on the lien has been filed.
B. University’s Option to Pay. If Lessee does not cause to be recorded a bond
protecting the Leased Area from any asserted lien as provided above, and a final
judgment has been rendered against Lessee by a court of competent jurisdiction for the
foreclosure of the lien, and if Lessee fails to stay the execution of the judgment by lawful
means or to pay such judgment, the University shall have the right, but not the duty, to
pay or otherwise discharge, stay or prevent the execution of any such judgment or lien or
both. Lessee shall reimburse the University for all costs, including reasonable attorney’s
fees, incurred by the University in the discharge, stay or prevention of execution of any
such judgment, lien or both, together with interest on such costs and fees. Said costs, fees
and interest shall be treated as additional money due from Lessee.
40. HAZARDOUS MATERIAL.
A. As used in this Lease, the term “Hazardous Material” means any hazardous or
toxic substance, material, or waste that is or becomes regulated by any local
governmental authority, the State of Alaska, or the United States. Hazardous Material
also includes petroleum products and petroleum by-products.
B. Lessee, its employees, agents, representatives, contractors, subcontractors or
invitees, may not cause or permit any Hazardous Material, except as noted in subpart C
of this Paragraph, to be brought upon, kept, used, or permitted in or about the Leased
Area or adjoining property owned by the University. If (i.) Lessee, its employees, agents,
representatives, contractors, subcontractors or invitees, breach these obligations, or (ii.)
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the presence or release of Hazardous Material on the Leased Area or adjoining property
owned by the University, caused or negligently permitted by Lessee, its employees,
agents, representatives, contractors, subcontractors or invitees, results in injury, illness,
death or contamination of the Leased Area, or (iii.) contamination of the Leased Area or
adjoining property owned by the University, by Hazardous Material otherwise occurs by
the acts of Lessee, its employees, agents, representatives, contractors, subcontractors or
invitees, then Lessee shall indemnify, defend, and hold the University, its Board of
Regents, officers, employees, agents and representatives harmless from all claims,
judgments, damages, penalties, fees, costs, liabilities, or losses (including, without
limitation, diminution in value of the Property or adjoining property, damages for the loss
or restriction of usable space or of any amenity of the Leased Area or adjoining property,
and sums paid in settlement of claims, attorney fees, consultant fees, and expert fees)
which arise during or after the period in which this Lease is in effect as a result of
such contamination so long as the acts or omissions occur during the term, extensions, or
holdover period of the Lease. This indemnification of the University by Lessee includes,
without limitation, costs incurred in connection with defense, enforcement, or
substantiation of any provisions of this Lease, any investigation of site conditions or any
clean-up, remedial, removal, or restoration work required by any federal, state, or local
government agency or political subdivision because of Hazardous Material present in the
soil or groundwater on or under the Leased Area and adjoining properties. Additionally,
if the presence of any Hazardous Material on the Leased Area or adjoining property
owned by the University which was caused or negligently permitted by Lessee results in
any contamination of the Leased Area or adjoining property owned by the University,
Lessee shall promptly take all actions at its sole expense as are necessary to return the
Leased Area and adjoining property to the condition existing prior to the introduction of
any such Hazardous Material to the Leased Area or the adjoining property. The
University’s approval of such remedial actions shall first be obtained, but approval shall
not be unreasonably withheld so long as such actions would not potentially have any
material adverse long-term or short-term effect on the Leased Area or the adjoining
property owned by the University.
C. Lessee, its employees, agents, representatives, contractors, subcontractors and
invitees may bring, keep, or use fuel, oil, grease, and other materials that are necessary
for transportation to and from the Leased Area.
D. The obligations arising under this Paragraph shall survive expiration or earlier
termination of this Lease.
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41. WARRANTIES. The University makes no warranties, express or implied, as to the
fitness of the Leased Area for any particular use. The University shall not be liable under any
circumstances for any damages relating to the use or occupancy of the Leased Area or for any
special, consequential or incidental damages.
42. RELATIONSHIP. This Lease shall in no way be construed so as to create a joint
venture, agency, employment or partnership relationship between the University and the Lessee.
43. AMENDMENTS. This Lease may be amended from time to time by mutual consent of
the parties. No amendment shall be effective unless it is in writing and signed by both parties.
44. TIME. Time is of the essence in this Lease. Time specifications contained herein are to
be strictly construed.
45. RECORDING. Upon mutual agreement of the parties, the parties may execute and
record a Memorandum of Lease which Memorandum of Lease shall contain an outline of the
terms of this Lease. In the event of conflict or ambiguity between the documents, the Lease shall
be controlling.
46. JOINT AUTHORSHIP. In the event of ambiguity, this Lease shall be deemed to have
been prepared equally by both parties and shall be construed accordingly.
47. PARAGRAPH HEADINGS. The descriptive paragraph headings are for convenience
and reference only. The words contained therein shall not be held to expand, modify, amplify or
aid in the interpretation, construction or meaning of this Lease.
48. GOVERNING LAW. This Lease shall be interpreted and construed in accordance with,
and governed and enforced in all respects by the laws of the State of Alaska. All legal
proceedings arising as a result of this Lease shall be brought only in the Superior Court, Third
Judicial District, Anchorage, Alaska.
49. FIRE SUPPRESSION. While this Lease is in effect, Lessee shall independently make
every reasonable effort to prevent and suppress fires in and around the Leased Area, and shall
require its invitees, employees, agents, representatives, contractors, and employees of contractors
to do likewise. Uncontrolled fires shall be reported immediately to the appropriate authorities.
50. ACCESS. University makes no representation concerning the presence or availability or
feasibility of access to the Leased Area. The University expressly disclaims any responsibility or
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obligation to acquire access easements or construct or maintain access roads to the Leased Area.
Access to the Leased Area shall be the responsibility of Lessee.
51. INCIDENT REPORTS. During the term of this Lease and without prior demand by the
University, all incidents that take place on the Leased Area resulting in personal injury, property
damage or emergency response, including police, medical and fire shall be reported, in detail, to
the University within TEN (10) DAYS of said occurrence.
52. MINIMIZE SURFACE DISTURBANCE. Lessee’s activities shall be conducted so as
to minimize disturbance of drainage systems, changing course or character of water bodies, seeps
or marshes, and to minimize disturbance or damage to the Leased Area resulting from Lessee
activities.
53. COST OF SUSTAINING AN ACTION. In the event either the University or the
Lessee brings legal action against the other claiming a breach or default of this Lease, the losing
party in such litigation shall pay the prevailing party the cost of sustaining such action, including
reasonable attorneys’ fees, as may be fixed by the court.
54. SURVEY. The University expressly disclaims any warranty of title, and further
disclaims the accuracy of any survey. Discrepancies, conflicts in boundary lines, encroachments,
and any facts which a correct survey and inspection of the Leased Area would disclose under this
Lease are not the responsibility of the University. Throughout the term of the Lease, Lessee
shall protect all survey monuments and accessories, such as witness corners, reference
monuments and bearing trees from disturbance. Any damaged or destroyed monuments or
markers shall be re-established in accordance with accepted survey practices, at Lessee’s sole
expense.
55. ENTIRE AGREEMENT. This Lease and documents referred to herein contain the
entire agreement between the parties with respect to the Lease of the Leased Area by University
to Lessee, and may only be modified by a document in writing executed by both University and
Lessee. No promise, representation, warranty or covenant not included in this Lease or the
exhibits and documents referred to herein has been or is relied on by either party. Each party has
relied on its own counsel and advisors, and on the warranties, representations and covenants of
this Lease itself.
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56. ADMINSTRATIVE PROTEST OF UNIVERSITY DECISIONS.
A. Protest to the Director of Land Management. Lessee may protest any
decisions made in relation to this Lease to the Director of Land Management, University
of Alaska. To protest a decision, Lessee shall: (i) notify the Director of Land
Management, in writing, of the protest, within THIRTY (30) CALENDAR DAYS after
the University has given notice of the decision; and (ii) explain in detail all the reasons
for the protest and the form of relief requested. The Director shall issue a written
determination within NINETY (90) CALENDAR DAYS after Lessee has supplied the
Director of Land Management all the necessary supporting information requested by the
Director. This deadline may be extended by the University’s Chief Procurement Officer
provided the Director establishes good cause for the extension and the Chief Procurement
Officer authorizes the extension in writing served on the Director and Purchaser. If the
Director of Land Management does not issue a decision on the protest within NINETY
(90) CALENDAR DAYS after Lessee filed the requested information and documents
with the Director as requested, and within any extension granted by the Procurement
Officer, then Lessee’s protest shall be deemed to have been denied.
B. Appeal of a Decision of the Director. Lessee may appeal the decision of the
Director of Land Management to the Chief Procurement Officer. Lessee must file written
notice of the appeal, a copy of the Director’s decision, if applicable, and a list of all legal
and factual issues in dispute by no later than FIFTEEN (15) CALENDAR DAYS after
the date the Director served the decision on Lessee. Within FIFTEEN (15)
CALENDAR DAYS of receipt of the appeal, the Chief Procurement Officer shall adopt
the decision of the Director as the Chief Procurement Officer’s final decision or give
notice that a hearing will be held to resolve the dispute. The notice adopting the
Director’s decision or setting a hearing will be served, in writing, on Lessee and the
Director. If there is a hearing, it will be conducted under Sections 10.14 - 16 of the
University’s Procurement Code, Board of Regents Policy 05.06.670 and Alaska Statute
36.30.670, as amended or superseded from time to time during this Lease. The Chief
Procurement Officer’s final decision must be issued, in writing, and served on Lessee and
the Director within TWENTY (20) CALENDAR DAYS after the hearing.
C. Stay. A protest, appeal or petition for reconsideration shall not automatically stay
the decision of the University. A party protesting, appealing or petitioning for
reconsideration must separately and timely move for such a stay prior to the time such
decision becomes effective (or where relevant, the actions specified in such decision must
be taken). Such a stay may be granted only where the Director or Chief Procurement
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Officer finds that standards (including a bonding requirement) similar to those set forth in
AS 36.30.575, or otherwise applicable under Alaska law to preliminary injunctions, have
been satisfied by the party petitioning for reconsideration.
D. Other Procedures. To the extent any further or more specific procedures appear,
in the discretion of the University, to be necessary or appropriate, the University may
specify such procedures as applicable before or during the course of any petition for
reconsideration, proceeding, protest or appeal consistent with the minimum process
required by law, if any. In the event the Director or Chief Procurement Officer are
unavailable or disqualified from participating in any process under this petition for
reconsideration or protest, the University may appoint such person as it deems
appropriate to fulfill that function.
E. Appeal of a Decision of the Chief Procurement Officer. An appeal of the
Chief Procurement Officer’s final decision may be filed with the Superior Court, Third
Judicial District, located in Anchorage, Alaska in accordance with the Alaska Rules of
Appellate Procedure, by no later than THIRTY (30) CALENDAR DAYS after the Chief
Procurement Officer serves the final decision on Lessee.
F. Notices. All notices given under this Paragraph 56 shall be given in accordance
with Paragraph 26 of this Lease.
57. EFFECTIVE DATE. This Lease takes effect on , 2011.
BY SIGNING THIS LEASE, University and Lessee agree to be bound by its provisions.
LESSEE:
By: Date
Its:
UNIVERSITY:
Mari E. Montgomery, Director Date
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ACKNOWLEDGEMENTS
STATE OF ALASKA )
) ss
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this day of , 2011, before me, the
undersigned Notary Public, in and for the State of Alaska, duly commissioned and sworn as
such, personally appeared MARI E. MONTGOMERY, to me known to be the Director of Land
Management of the University of Alaska, a corporation created under the Constitution and laws
of the State of Alaska, and who acknowledged to me that she executed the within and foregoing
lease on behalf of said corporation, by authority of its Board of Regents, as the voluntary act and
deed of said corporation, for the uses and purposes therein mentioned.
WITNESS my hand and official seal the day and year in the certificate first above written.
Notary Public in and for Alaska
My Commission Expires:
STATE OF ALASKA )
) ss
THIRD JUDICIAL DISTRICT )
THIS IS TO CERTIFY that on this day of , 2011, before me, the
undersigned Notary Public, in and for the State of Alaska, duly commissioned and sworn as
such, personally appeared , to me known to be
the of _________________, and who acknowledged to
me that he/she executed the within and foregoing lease on behalf of said corporation, with
authority, freely and voluntarily for the uses and purposes therein mentioned.
WITNESS my hand and official seal the day and year in the certificate first above written.
Notary Public in and for Alaska
My Commission Expires:
MS.GB.XXXX.003